Retired #RecastingvsPrepayment
Retired and considering your options: Paying down the mortgage vs recasting
Considering your current financial situation and future plans, it’s important to weigh the pros and cons of paying down your mortgage versus recasting it. Let’s delve into the details and understand the implications of each choice.
Paying down the mortgage: A straightforward approach
- Advantage: Paying down a significant portion of your mortgage can lead to a lower overall balance, reducing the amount of interest you’ll pay over the life of the loan.
- Consideration: While this approach can be beneficial in the long run, it may not immediately lower your monthly payments, which could still be a strain on your fixed income.
Recasting the mortgage: Lowering your monthly payments
- Advantage: Recasting your mortgage allows you to keep the same loan term but reduce your monthly payments by recalculating them based on the lower balance after the lump sum payment.
- Consideration: The process of recasting may take 60-90 days, during which your interim payments could be retroactively adjusted to reflect the lower balance. It’s essential to understand how your payments will be applied during this period.
Best course of action for retirees: Lowering monthly payments and reducing interest
In the scenario of being on a fixed income and wanting to reduce your monthly mortgage payments, recasting the loan seems like the most viable option. By submitting the lump sum payment with the recasting application, you can potentially benefit from lower monthly payments sooner rather than later.
Conclusion
When faced with the decision between paying down your mortgage or recasting it, the best course of action for retirees looking to lower monthly payments and minimize interest payments may lean towards recasting. Understanding the process, timeline, and impact on your finances is crucial in making an informed decision that aligns with your financial goals in retirement.
You want to recast.
The advantage to NOT recasting and just paying it down is that you pay off your mortgage in just a couple more years. Of course, you’re still paying $4500/month to do that and you’ve used all your cash, so there’s that.
Recasting means still taking 30 years (or whatever your original loan term is), but only paying a few hundred a month for principal and interest. Taxes and insurance are what they are either way. So your mortgage will likely outlive you, but at least it’ll be cheap.
>in a position to pay off $500K of the mortgage, leaving some money for improvements on the house we bought
Pay off the mortgage in full now by using the money you want to hold back for improvements. There is no need to pay that interest especially when you say the payment is a strain.
Set aside the $3400 mortgage payment and pay cash for your home improvements when you can afford to pay for them.
Pay the loan in full if any possible way. If not hold 50k back and send rest to payment. Keep 50k to add to monthly mortgage payment when needed